Treating customers fairly is not just a regulatory obligation, it is at the core of our philosophy and practices. Inherent in this is explaining the risks of investing in loans requested by borrowers on our platform. We urge you to read the risk warnings below and consider these risks before making any commitment. Your capital is at risk and any potential interest payments are also at risk should a loan default.
AN INVESTMENT IN LOANS ON ANY PEER LENDING PLATFORM IS SPECULATIVE AND INVOLVES RISK. EVEN LOANS THAT ARE BACKED BY ASSETS, SUCH AS THOSE ON ABLRATE HAVE A POTENTIAL FOR DEFAULT WHERE A LENDER COULD LOSE ALL OF THE FUNDS INVESTED. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING RISK FACTORS. THESE RISK FACTORS MAY NOT BE A COMPLETE LIST OF ALL RISK FACTORS ASSOCIATED WITH A LOAN VIA ABLRATE.
Investing in loans for companies involves a high degree of risk compared to bank deposits where funds are insured. The interest rate available from Ablrate Borrowers may be higher than bank/building society deposits but you would be taking significantly more risk investing in loans than you would in a bank savings account. You should carefully consider the following risks, as well as the other information, before making an investment via Ablrate. The risks discussed below could materially and adversely affect the borrower’s prospects, financial condition, and results of operations, cash flows and therefore the ability to pay interest and cause the trading price of the loans on the Secondary Market to decline significantly. You may lose all or a part of the investment.
RISKS RELATED TO FINANCIAL INFORMATION
Companies borrowing on the platform submit their information. While those businesses are vetted and assessed for suitability there may be no independent assessment of operating history upon which to assess the prospects or ability to pay interest to Lenders. Where independent accounts are available, these are historical and may not represent the current status of a business.
Information submitted by Borrowers, and the prospects and ability to pay interest must be considered in light of the risks, expenses and difficulties frequently encountered when any business is operating. Any lack of information on the operating history of the company will make it difficult for investors to assess the quality of the management and the ability to operate profitably and pay interest to the Lenders. Ablrate cannot assure Lenders that a Borrower will be able to implement their business strategies, that any of the strategies will be achieved or that the Borrower will be able to operate profitably and pay regular interest to the Lenders. Therefore Lenders must ensure they have read the information submitted by the Borrower and made their own assessment of the ability of the Borrower to pay interest due on loans.
We aim to mitigate the risk of the Borrower not paying interest and capital due by assuring that each loan is backed by an asset which, in the event of default could be seized and used to pay the Lenders the capital and interest due.
Some Borrowers may be holding companies and the principal asset within that business will be the asset loaned against. As a result, the Borrowing Company may be dependent on income from that asset to generate the funds necessary to meet the financial obligations to the Lenders.
The rights to the aircraft beneficially owned by lessors placing deals on the ablrate.com site may be owned by subsidiaries, which may structurally subordinate rights of the Lenders loaning money through ablrate.com. Although this happens in the normal course of business, Lenders should be aware of their preference in the transaction.
RISKS RELATED TO THE RELATIONSHIP WITH ABLRATE AND LEASING AGENTS/SPONSORS ON THE PLATFORM
In some transactions Ablrate may be relying on information provided by agents who have introduced a transaction or who are managing a transaction. The success or failure of the transaction will be dependent on the skill and care with which the agent performs its services under their agreements. Ablrate depends for some transactions on the diligence, care and skill of the agents.
RISKS RELATING TO THE AIRCRAFT LOANS PUT FORWARD FOR TRANSACTIONS ON THE PLATFORM
The variability of supply and demand for aircraft and other aviation assets could depress lease rates and the value of the leased assets.
The aviation leasing and sales industry has experienced periods of aircraft oversupply and undersupply. The oversupply of a specific type of aircraft or other aviation asset in the market is likely to depress lease rates for, and the value of, that type of asset. The supply and demand for aircraft is affected by various cyclical and non-cyclical factors that are not under the control of the Borrowers nor. These factors may produce sharp decreases in asset values and achievable lease rates, which may have an impact on the ability of the Borrower to exercise any bonus structures offered by Borrowers in an initial loan request. Should this be the case then transactions on the platform may not yield the results expected by Lenders which could negatively affect the expected return to Lenders.
RISK RELATING TO TRADING LOANS ON THE SECONDARY MARKET
There is no guarantee that a market for Ablrate loans will be created when a loan draws down. The liquidity of the market is totally driven by users of the platform. If you buy a loan in the hope of selling at a later date there may not be any buyers for that loan at the price you hope to achieve. If you buy a loan at a premium on the secondary market you have an added risk called ‘repayment risk’. The indicative yeilds on the secondary market are based on the cashflows remaining in the loan. If a borrower repays early and you have purchased at a premium, you could make a loss on that purchase. When we learn of early repayments we pause loans in the Secondary market for this reason.
RISK RELATING TO THE PLATFORM AND THE ADMINISTRATION OF LOANS
In the unlikely event that Ablrate is unable to continue in business, a third party would continue to administer the outstanding loans (Kingston Smith LLP). Although we aim to have a Service Fee in many of the loans on the platform which should cover the costs of administrating loans, third party administration of loans may incur increased costs to Lenders (where none existed previously). This could materially impact the return available on loans.
RISKS RELATED TO AN AVIATION LOAN
Deterioration in the financial condition of the commercial airline industry as a whole may have an adverse impact on the ability for Borrowers to pay their loans on the platform.
The risks affecting the airline customers are generally out of the control of the Borrower but, because they have a significant impact on the underlying lessees, they affect the Borrower as well so a prospective Lender should be comfortable with the risks they are taking across the sector.
RISKS RELATED TO THE OWNERSHIP OF THE LOANS
The Loans have no public market (other than the Secondary Market on Ablrate), and Ablrate cannot assure Lenders that an active trading market will develop. Thus the Loans are illiquid and may not be sold in a reasonable manner of time.
If a Lender does not diversify their portfolio of Loans sufficiently, the risks associated with this limited diversification will be higher than a fully diversified portfolio. Therefore, a Lender must be comfortable with their level of diversification in their loan portfolio compared to the returns they are receiving.
Changes in economic conditions, including, for example, interest rates, inflation rates, employment conditions, competition, technological developments, political and diplomatic events and trends, terrorism, and tax laws can affect substantially and adversely the Borrowers. None of these conditions is within the control of Ablrate or the Borrowers and no assurances can be given that Borrowers will anticipate these developments.
While Ablrate does everything it can to secure Lenders funds in each transaction, there is no guarantee provided by Ablrate that the investments made in loans on the platform will not result in losses to Lenders.
Ablrate applies a risk management approach that it believes is appropriate for each loan. The application of any risk management approach involves numerous judgments and qualitative assessments. No risk management system is fail-safe, and no assurance can be given that the Company’s risk control framework will achieve its objectives.
Investment Risks in General
There are certain market conditions in which any given investment strategy is unlikely to be profitable. Neither the Company nor the management has the ability to control or predict such market conditions. Your investment in loans will not increase or decrease with financial market movements and you will not receive more than the interest due during the term of the loan and capital owed at the end of the loan. The only exception to this is where you sell your loan for a premium in the Secondary Market. However, you should not rely on any enhancements to your capital from the sale of your loan as liquidity in the Secondary Market is not guaranteed and a market may not develop on the Ablrate platform for existing loans being sold by users.
We would strongly suggest that you take independent financial advice before considering investing through any peer lending platform or any investment in general. An independent advisor will be able to assess your suitability to invest in such loans and give advice based on your individual circumstances. Ablrate, its management and employees are not authorised to give you advice and we act solely as an introduction platform bringing together Lenders and Borrowers, we take no risk nor position in any transactions unless we have declared as much within the terms of a particular loan.
THE FOREGOING RISK FACTORS DO NOT PURPORT TO BE A COMPLETE EXPLANATION OF THE RISKS INVOLVED IN MAKING INVESTMENTS ON THE PLATFORM. POTENTIAL INVESTORS SHOULD CONSULT THEIR OWN PROFESSIONAL ADVISERS, BEFORE DECIDING TO INVEST VIA ABLRATE.